OREANDA-NEWS. April 13, 2010. OJSC Pharmacy Chain 36.6 [RTS:APTK; MICEX:RU14APTK1007] the leading Russian pharmaceutical retailer announces unaudited 9M 2009 and Q3 2009 financial results prepared in accordance with the International Financial Reporting Standards (IFRS).

Group highlights of 9M 2009:

Group revenue from ongoing operations1 decreased by 16.8% to RUR 16 035.9 mln compared with 9M 2008.

Gross profit from ongoing operations1 decreased by 20.9% to RUR 6 193.5 mln, 38.6% of consolidated revenues;

Consolidated EBITDA from ongoing operations1 reached RUR 973.6 compared with RUR 417.8 mln in 9M 2008, a 133.0% improvement;

Underlying Net loss from ongoing operations1 (excluding sale of investments, disposal of discontinued operations and foreign exchange effect) decreased from RUR 1 226.6 mln in 9M 2008 to RUR 778.3 mln in 9M 2009, a 36.5% improvement;

The retail unit organically opened 5 and closed 15 stores in Q3 2009.

Group consolidated financial results

 

period ends

 

 

 

 

 

 

Q3, mln RUR

9M, mln RUR

 

 

 

 

 

 

2009

2008

ch, %

2009

2008

ch, %

 

 

 

 

 

 

 

Revenue

4 579,1

6 173,1

-25,8%

16 035,9

19 552,92

-18%

Retail

3 528,8

5 033,9

-29,9%

12 366,4

15 765,5

-21,6%

Veropharm

915,2

1 004,5

-8,9%

3 215,3

3 076,7

4,5%

other

135,1

134,7

0,3%

454,2

710,7

-36,1%

Gross profit

1 747,3

2 209,9

-20,9%

6 193,5

6 573,22

-5,8%

Retail

1 139,8

1 564,9

-27,2%

3 917,1

4 312,3

-9,2%

% of sales

32,3%

31,1%

 

31,7%

27,4%

 

Veropharm

552,7

606,7

-8,9%

2 135,2

2 012,8

6,1%

% of sales

60,4%

60,4%

 

66,4%

65,4%

 

other

54,8

38,3

43,1%

141,2

248,1

-43,1%3

EBITDA

149,9

255,9

-84,6%

973,6

487,62

99,7%

Retail (inc.Corp.center)

-63,5

9,7

-754,64%

20,2

-496,3

-104,1%

% of sales

-1,8%

-0,2%

 

0,2%

-3,1%

 

Veropharm

214,1

263,3

-18,7%

973,2

947,8

2,7%

%% of sales

23,4%

26,2%

 

30,3%

30,8%

 

other

-0,7

-17,1

-95,95%

-19,8

36,1

-154,8%

Net profit

-229,0

77,5

-395,55%

-830,8

-117,22

608,9%

Retail (inc.Corp.center)

-355,0

71,8

-394,46%

-1 535,5

-760,8

101,8%

Veropharm

131,6

171,1

-23,1%

730,3

635,4

14,9%

other

-5,6

-21,8

-74,3%

-25,6

8,2

-412,27%

 

Retail unit:

Revenue

As compared to the relative period the year before, 9M 2009 sales of the retail unit decreased by 21.6% in ruble terms from RUR 15 765.5 mln to RUR 12 366.4 mln driven by the closure of non-performing stores, partial shortages of products as a result of working capital decline and decline in customer traffic. In Q3 2009 versus Q3 2008 sales of the Retail unit decreased by 29.9% from RUR 5 033.9 mln to RUR 3 528.8 mln. The decrease in sales of the Retail unit in Q3 2009 versus Q2 2009 by 12.8% is attributable primarily to store closings, seasonal factors and lower consumer demand.

Like-for-like sales1 in 9M 2009 versus 9M 2008 decreased by 16% in ruble terms driven by partial stock-outs and decline in customer traffic. L-f-L average check in 9M 2009 compared with 9M 2008 increased by 12% in ruble terms; traffic decreased by 24%. In Q3 2009 versus Q3 2008 L-f-L sales decreased by 25% in ruble terms, average check increased by 6% in ruble terms, traffic declined by 29%.

Gross margin

In 9M 2009 gross margin increased by 4.3% to 31.7% from 27.4% in 9M 2008. Such significant growth was achieved by an increased share of Private label in Total gross sales (from 3.9% in 9M 2008 to 6.8% in 9M 2009), successful commercial activity in price-cuts from suppliers, improvement of pricing and assortment policies. In Q3 2009 gross margin increased by 1.2% to 32.3% from 31.1% in Q3 2008. Compared to Q2 2009, gross margin increased by 0.5%.

 

Retail Unit

 

 

 

 

 

 

Q3, mln RUR

9 months, mln RUR

 

 

 

 

 

 

2009

2008

ch, %

2009

2008

ch, %

 

 

 

 

 

 

 

Sales

3 528,8

5 033,9

-29,9%

12 366,4

15 765,5

-21,6%

Gross profit

1 139,8

1 564,9

-27,2%

3 917,1

4 312,3

-9,2%

% of sales

32,3%

31,1%

 

31,7%

27,4%

 

 

Selling, general and administrative expenses

Selling, general and administrative expenses dropped by 18.4% in ruble terms from RUR 5 101.0 mln in 9M 2008 to RUR 4 164.5 mln in 9M 2009 due to continuous implementation of the cost optimization program. In Q3 2009, selling, general and administrative expenses decreased by 21.8% to RUR 1 284.9 mln from RUR 1 643.3 mln in Q3 2008. Compared with Q2 2009, SG&A costs shrank by 6.3%.

Despite the decrease in absolute numbers of SG&A costs, their share in overall sales increased by 3.8% in Q3 2009 compared with Q3 2008, and by 1.3% in 9M 2009 compared with 9M 2008 due to decline in revenues.

 

Retail Unit

 

 

 

 

 

 

Q3, mln RUR

9 months, mln RUR

 

 

 

 

 

 

2009

2008

ch, %

2009

2008

ch, %

 

 

 

 

 

 

 

Selling, general and administrative costs

1 284,9

1 643,3

-21,8%

4 164,5

5 101,0

-18,4%

% of sales

36,4%

32,6%

 

33,7%

32,4%

 

 

9M 2009 store level performance of like-for-like stores demonstrated the following results:

RUR, mln

9M 2009

9M 2008

ch, %

 

 

 

 

 

 

 

 

 

Moscow

Regions

Total

Moscow

Regions

Total

Moscow

Regions

Total

 

 

 

 

 

 

 

 

 

 

Net Sales

4 165,2

5 783,2

9 948,4

4 492,5

7 330,4

11 822,9

-7,3%

-21,1%

-15,9%

Gross Profit

1 517,1

1 657,0

3 174,1

1 523,6

1 860,2

3 383,8

-0,4%

-10,9%

-6,2%

%

36,4%

28,7%

31,9%

33,9%

25,4%

28,6%

 

 

 

Store level expenses

1 100,9

1 017,9

2 118,8

996,4

1 138,8

2 135,2

10,5%

-10,6%

-0,8%

%

26,4%

17,6%

21,3%

22,2%

15,5%

18,1%

 

 

 

Rent

471,7

368,4

840,1

394,1

379,0

773,1

19,7%

-2,8%

8,7%

Personnel

442,4

470,7

913,1

458,2

558,8

1 017,0

-3,4%

-15,8%

-10,2%

Other

186,8

178,8

365,6

144,1

201,0

345,1

29,6%

-11,0%

5,9%

Store level Operating profit

416,2

639,1

1 055,3

527,2

721,4

1 248,6

-21,1%

-11,4%

-15,5%

%

10,0%

11,1%

10,6%

11,7%

9,8%

10,6%

 

 

 

Number of comparable stores

198

573

771

198

573

771

 

 

 

 

In 9M 2009 store level net sales in Like-for-Like stores decreased by 15.9% compared with 9M 2008 and reached RUR 9 948.4 mln also as a result of the decrease in sales in the regions due to partial stock-outs and changes in consumer demand towards cheaper goods.

Store level expenses in Like-for-like stores declined by 0.8% in 9M 2009 compared with the same period last year mainly due to the decrease in headcount (primarily in the regions) and significant cost reduction on expendable materials in the regions. Rent increase in the Moscow region in the period under consideration was due to the exchange rate effect as most of the lease agreements in the reported like-for-like stores are dollar-based.

Q3 2009 store level performance of like-for-like stores demonstrated the following results:

RUR, mln

9M 2009

9M 2008

ch, %

 

 

 

 

 

 

 

 

 

Moscow

Regions

Total

Moscow

Regions

Total

Moscow

Regions

Total

 

 

 

 

 

 

 

 

 

 

Net Sales

1 249,0

1 629,0

2 878,0

1 476,1

2 367,1

3 843,2

-15,4%

-31,2%

-25,1%

Gross Profit

467,2

478,8

946,0

550,0

619,1

1 169,1

-15,1%

-22,7%

-19,1%

%

37,4%

29,4%

32,9%

37,3%

26,2%

30,4%

 

 

 

Store level expenses

338,4

305,8

644,2

311,8

383,6

695,4

8,5%

-20,3%

-7,4%

%

27,1%

18,8%

22,4%

21,1%

16,2%

18,1%

 

 

 

Rent

157,0

118,5

275,5

125,5

128,3

253,8

25,1%

-7,6%

8,6%

Personnel

127,3

133,4

260,7

160,0

191,1

351,1

-20,4%

-30,2%

-25,7%

Other

54,1

53,9

108,0

26,3

64,2

90,5

105,7%

-16,0%

19,3%

Store level Operating profit

128,8

173,0

301,8

238,2

235,5

473,7

-45,9%

-26,5%

-36,3%

%

10,3%

10,6%

10,5%

16,1%

9,9%

12,3%

 

 

 

Number of comparable stores

198

573

771

198

573

771

 

 

 

 

Store level net sales in Like-for-Like stores decreased by 25.1% from RUR 3 843.2 mln in Q3 2008 to RUR 2 878.0 mln in Q3 2009 mainly due to the decrease in sales as a result of partial stock-outs and decline in consumer demand.

Store level expenses in Like-for-like stores shrank by 7.4% in Q3 2009 compared with the same period last year mainly due to decrease in headcount in the regions and significant cost reduction on expendable materials in the Moscow region as well as in the regions. Significant rent increase in the Moscow region in the period under consideration was due to the exchange rate effect as most of the lease agreements in the reported like-for-like stores are dollar-based (the similar situation occurred in Q2 2009 compared with Q2 2008).

Trade accounts payable

Compared with 9M 2008, trade accounts payable decreased by 11.7% from RUR 5 739.3 mln to RUR 5 066.7 mln in 9M 2009 as a result of converting part of accounts payable into debt and decrease in  the absolute amount of inventory. Versus Q2 2009, in Q3 2009 trade accounts payable decreased by 9.6% due to converting part of accounts payable into debt.

Inventory

Average days of turnover decreased from 72 days, as of the end of Q3 2008, to 70 days, as of the end of Q3 2009, due to Company implementing the policy aimed at reducing absolute inventory levels.  Compared with Q2 2009, average days of turnover decreased from 74 days due to seasonality.

In absolute terms, inventory was reduced by 33.3% to RUR 2 179.6 mln, as of the end of Q3 2009, compared with  RUR 3 266.0 mln, as of the end of Q3 2008.

Other businesses

Veropharm

For the latest update on 9M 2009 performance please refer to the official press-release of the company as of April 7th, 2010.

ELC

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) reached RUR 100.8 mln, a 27.9% growth driven primarily by an increase in L-f-L sales. In Q3 2009 versus Q3 2008 ELC sales grew by 15.9% and reached RUR 34.3 mln.

As of the end of Q3 2009, the unit operated 10 stores.

Group financial debt

Group Financial Debt at the end of Q3 2009 increased to RUR 5 135.4 mln from RUR 4 891.5 mln at the end of Q3 2008 and from RUR 4 674.1 mln at the end of Q2 2009 as a result of converting part of accounts payable to suppliers to debt. At the end of Q3 2009, the Retail unit debt stood at RUR 4 416.8 mln with 36.5% denominated in dollars. 69.9% of the Group’s debt is short-term.

In Q3 2009 the Company achieved agreements with its creditors (Nomos Bank and Uralsib Bank) on extension of credit lines’ maturity. Under the signed additional agreements on terms and conditions:

RUR 200 mln credit facility with Nomos Bank matures before 31.03.2010;

RUR 500 mln credit facility with Nomos Bank matures before 30.12.2010;

USD 26 950 000 dollars credit facility with Uralsib Bank matures before 25.12.2010.

Group financial costs

In 9M 2009 versus 9M 2008 consolidated financial costs grew by 24.0% to RUR 887.7 mln due to the financial costs associated with financial debt restructuring and fulfillment obligations before suppliers. Due to the similar reasons in Q3 2009 versus Q3 2008 financial costs grew by 39.7% and reached RUR 307.1 mln.

Investments

In 9M 2009 the Group invested RUR 139.3 mln, whereas retail investments stood at RUR 81.1 mln.

Group net profit

Underlying Net loss from ongoing operations (excluding sale of investments, disposal of discontinued operations and foreign exchange effect) increased from RUR 164.6 mln in Q3 2008 to RUR 302.6 mln in Q3 2009, a 83.8% worsening versus Q3 2008 as a result of the decline in revenues.

Underlying Net loss from ongoing operations1 (excluding sale of investments, disposal of discontinued operations and foreign exchange effect) decreased from RUR 1 226.6 mln in 9M 2008 to RUR 778.3 mln in 9M 2009, a 36.5% improvement.

1 Ongoing operations’ results exclude operating results of EMC which was sold in May 2008.

2 Including financial results of European Medical Center

3 Decrease in gross profit in “Other” segment in 9M 2009 compared with 9M 2008 is due to the fact, that 9M 2008 data includes financial results of EMC which was sold in May 2008.

4 Changes in Retail EBITDA in Q3 2009 results from changes in consumer demand and seasonality factors which led to decrease in Revenue in Q3 2009 compared with Q3 2008.

5 EBITDA improvement in “Other” segment in Q3 2009 compared with Q3 2008 resulted mainly from EBITDA improvements in “FTK Vremya” segment.

6 Net Loss increase in Q3 2009 compared with Q3 2008 in the Retail unit is due to the fact that Q3 2008 Net Loss data includes revenue from sale of investments in the amount of  RUR 396.4 mln, growth of financial costs and changes in consumer demand.

7 The L-F-L reporting is executed for a selection of comparable stores, which are:

opened or acquired 24 months from the current reporting period, and

neither rebranded nor reformatted or somehow significantly changed during last 24 months, and

not closed in the current reporting period.